We compared this list with our International Equity Index, VIEQX, and the country weightings of a cap-weighted index.

For 7 of the top 10 countries with the highest debt-to-GDP ratios in the world, VIEQX is either not invested in them at all, or underweight compared to a cap-weighted index.

*Table courtesy of Visual Capitalist

At the very top of the list is Japan, in which we have a roughly 7.5% weighting, compared to cap-weighted, which holds them at 16.4%. We are not invested in Greece, the nation with the second highest debt-to-GDP, at all.

“Japan and Greece are the most indebted countries in the world, with debt-to-GDP ratios of 237.6% and 181.8% respectively.”

Japan doesn’t exactly have the reputation for reckless spending like Greece does, so you might assume their finances are stable. But a seemingly stable fiscal situation can become very unstable very quickly.

“Debt can accumulate in an unsustainable way if governments are not proactive. This situation can create a vicious cycle, where mounting debt can start hampering growth, making the debt ultimately harder to pay off.”

Now we’ll look at the countries at the other end of the list, with the lowest national debt.

*Table courtesy of Visual Capitalist

Most of these countries are low in debt because they’re not modern functioning economies that are readily investable. In other words, they don’t have a lot of debt because no one will lend to them, not because they have a culture of prudence.

8 of the 10 lowest debt countries are some combination of too small, too politically unstable, or just too underdeveloped to for us to invest in. In the other 2, we’re overweight. Hong Kong is an exception. They’re a developed, modern economy that still manages to maintain very, very low debt. We hold Hong Kong at about 7.0%, and cap-weighted holds them at 3.7%. In Russia, #7, we have a roughly 2% weighting, compared to 0.9% for cap-weighted. Russia isn’t exactly a developed modern economy, but it’s not as small or as undeveloped as some others on this list. Russian stocks are doing moderately well, growing at 8% over the past year, when other markets are falling.

Debt-to-GDP ratios may no longer be a point of focus in politics, but that metric should be no less important to investors than it was in 2014. In fact, the lack of concern over mounting debt makes the situation more dangerous than it used to be, as heads of state are no longer under political pressure to manage the nations finances. Investors should be more concerned with the global debt situation, not less, as a high debt-to-GDP country can easily find itself in a fiscal and financial crisis.

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Investments involve risk. Principal loss is possible. The Funds have the same risks as the underlying securities traded on the exchange throughout the day at market price. Redemptions are limited and often commissions are charged on each trade. VIDI is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments in emerging markets. A fund that concentrates its investments in the securities of a particular industry or geographic area may be more volatile than a fund that invests in a broader range of industries. VIDI and VBND may invest in illiquid or thinly traded securities which involve additional risks such as limited liquidity and greater volatility. VBND may make investments in debt securities. The Fund's investments in high yield securities expose it to a substantial degree of credit risk. These investments are considered speculative under traditional investment standards. Debt issuers and other counterparties may not honor their obligations or may have their debt downgraded by ratings agencies. An increase in interest rates may cause the value of fixed-income securities held by the Fund to decline. During periods of rising interest rates, certain debt obligations will be paid off substantially more slowly than originally anticipated and the value of those securities may fall sharply, resulting in a decline in the Fund's income and potentially in the value of the Fund's investments. VBND may also invest in asset backed and mortgage backed securities which include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. The performance of the funds may diverge from that of the Index. Because the Funds employ a representative sampling strategy and may also invest up to 20% of its assets in securities that are not included in the Index, the Funds may experience tracking error to a greater extent than a fund that seeks to replicate an index. The Funds are not actively managed and may be affected by a general decline in market segments related to the index. The Funds invest in securities included in, or representative of securities included in, the index, regardless of their investment merits. Small and medium-capitalization companies tend to have more limited liquidity and greater price volatility than large-capitalization companies. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value.

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Diversification does not guarantee a profit or protect from loss in a declining market.